So you're wondering about investing in precious metals. Millions of people ponder over the same question but aren't sure which metals to buy, how to buy them, how much of any metal to purchase, why to put PM (precious metal) into a portfolio or retirement fund, and more.
So, there's really a lot more to the question than "How can I invest in precious metals?"
How To Get Started
For people who are new to the niche, which includes silver, gold, palladium, and platinum, the idea of investing in PMs can seem befuddling. The best place to start is learning why so many people hold gold, silver, and other metals in their portfolios and retirement account.
Next, it's essential to arrive at a figure, based on your own budget and lifestyle, about how much of any given metal you should buy.
Equally vital is knowing the mechanics of the process, namely how to make a PM purchase, the pros, and cons of holding these kinds of assets, and how people use PMs to build safe retirement accounts.
There's much to cover, so let's dive in with answering the question of why millions of working adults choose to acquire precious metals in the first place.
Why Buy and How Much?
The two main reasons people buy precious metals are balancing a portfolio in terms of risk and building a comfortable retirement in the form of a gold IRA. The amount they buy varies based on their income, the amount of PMs they want in a portfolio or IRA, the current price of their favorite metal, and a few other factors.
It also depends on your risk tolerance. Some people put 50% or more into precious metals and some advisors recommend only 10% max. There is no right or wrong answer here, since investing comes down to your own personal financial goals, risk tolerance, and other factors.
What Options Do I Have?
There are numerous ways to start investments in precious metals. You can buy bullion (physical metal) from a dealer and store where you wish. The best metal to invest in right now is likely going to be gold and silver.
Or, as noted below, you can purchase bullion and let a third-party store it for you in an IRS-approved vault. You'd choose this method if you wanted to set up a gold IRA (note that a "gold" IRA can hold any of the precious metals, not just gold).
Other ways to invest in PMs included buying stock in mining companies, exchange-traded funds (ETFs), PM futures and options, or stock in companies whose profits are closely tied to precious metals' value. However, all these ways are indirect methods of investing instead of direct ownership of PMs in the form of bullion that you store in a safe deposit box or IRS-approved vault.
What Are The Advantages?
It's possible to make a very long list of the pros of buying PMs. Here's a short version that includes some points you are aware of and some that are likely entirely new to you:
What Are The Drawbacks?
No investment class is perfect. That's what makes financial planning so exciting and challenging. Every individual's situation is unique, which means we all have our own ideal portfolio based on what we want overall and what we can afford. Here are some downsides to owning precious metals.
Retirement Investments In Precious Metals
Are you thinking of retiring early, or are you already very close to retirement age? If so, it's essential to consider the advantages of precious metals IRAs, also known as "gold" IRAs (even though you can put any PM into them, including or not including gold).
Precious metals IRAs are an excellent financial solution for those who want to either diversify their retirement accounts with metals or wish to go all-in and build an IRA exclusively composed of gold, silver, platinum, or palladium (or any combination thereof).
An IRA, simply put, is a special kind of savings account that was written into law in 1974. It allows people to set aside money, either before or after-tax, into an account whose earnings (in the form of interest or appreciation) are NOT taxed until the account is opened after the person retires and begins to withdraw the funds. At that time, you'll pay tax on the funds. But, chances are, you'll be in a much lower tax bracket at that time, which is why millions of people set up IRAs.
A variation, the Roth IRA, allows you to put after-tax money into the account. When you open a Roth after you retire, you pay NO tax on any of the proceeds. You can set up an IRA account through a banker or broker in just a few minutes.
There are contribution limits each year, with $6,000 the standard limit. If you're over 50, you can contribute $7,000 per person per year. Married couples, thus, can contribute twice as much.
Precious Metal IRA's
There's another form of retirement account called a "gold IRA." As noted, you can put any PM into it. To set up a gold IRA, technically called "precious metals IRAs," you need to work with a licensed custodian who will oversee the account for you. Plus, you'll need to find someone to sell you the metals, as well as an IRS-approved storage facility. You can't store the PMs yourself if you opt for a gold IRA.
However, the process of setting up a gold IRA is relatively simple if you work with a metals dealer who is closely connected with a licensed custodian and an approved storage facility. You can also convert a 401k plan or traditional IRA directly into a precious metals IRA whenever you want. Many people do so to put all or part of their retirement capital into precious metals.
Top PM Investing Companies
Putting It All Together
It's pretty evident that people seek out precious metals for various reasons, but mainly because their value tends to hold steady when the rest of the economy is in a slump or a state of volatile chaos.
Serious-minded adults who want to provide for a secure future often buy gold, silver, platinum, and palladium as a hedge against inflation, a store of value, or a way to protect themselves in the event of a serious economic meltdown.
It's telling that whenever the stock market tanks or there's a global threat like the COVID pandemic, the price of PMs typically rises. For centuries, human beings have sought out gold and silver, in particular, as a way to store their wealth and provide for their later years.
Among assets that investors can choose from, precious metals are unique. Holding them in an IRA can be one of the most effective ways in the modern era to build a comfortable retirement in the face of mounting societal tension and a volatile stock market.